Whistle-blower lawsuit alleges All Children's overpaid doctors in violation of federal law

All Children's Hospital in St. Petersburg merged with Johns Hopkins Medicine in 2011. A former employee says the hospital paid its physicians far more than was merited for their specialties to ensure a steady stream of patient referrals. DIRK SHADD | Times (2010)

ST. PETERSBURG — A former employee of All Children's Hospital has filed a whistle-blower lawsuit in federal court accusing the hospital of overpaying its physicians in violation of anti-kickback laws.

Barbara Schubert, a 60-year old Bradenton resident, worked at the hospital for more than a decade as director of operations for its doctors' practice. She contends that All Children's was so eager to hire doctors — ensuring a steady stream of patient referrals — that it paid them salaries far higher than was merited for their specialities.

For example, her suit alleges that All Children's hired a pediatric surgeon at a base salary of $600,000, when the fair market value for a doctor with his experience was closer to $350,000.

In all, the lawsuit, filed in Tampa in July 2011 and unsealed last month, says that All Children's overpaid its doctors by about $5 million in 2010. In so doing, Schubert claims it ran afoul of federal and state laws designed to prevent doctors from ordering costly, unnecessary procedures because they stand to benefit financially.

Florida Attorney General Pam Bondi's is conducting an investigation involving All Children's, her office said Tuesday, but declined to give specifics or comment on an open case. State and federal officials have not said whether they intend to get involved in the lawsuit, said Christopher Casper, Schubert's Tampa-based attorney. He said she was not available Tuesday to discuss her allegations.

Instead of the longtime model of doctors in private practice having staff privileges at hospitals, the new national trend is for hospitals to hire more of their own doctors as employees. In the past, All Children's officials have described their physician hiring efforts as necessary to better coordinate patient care at a time when the health care system is expanding its focus from caring for the sick to wellness and prevention.

But it can be a slippery slope, experts say, as the financial relationship between hospitals and doctors is closely regulated. Of key importance is the federal Stark law, which prohibits compensation that brings some type of benefit for doctors referring patients using Medicare and Medicaid, the government's health insurance programs for the elderly and the poor.

The vast majority of All Children's patients pay for their care through Medicaid, so taxpayers would potentially foot the bill for any medical services resulting from the overpayment of All Children's doctors, as the lawsuit alleges.

"They want to make sure there's kind of an arms-length relationship between the referring physician and the hospital," said Jeff Milburn, a consultant with the national Medical Group Management Association who specializes in developing and assessing physician compensation plans. But he noted that hospitals can use many payment approaches — and often are justified in making exceptions to their official plans.

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Back in 2007, Schubert was the administrator tasked with navigating these regulations in developing pay scales for physicians as All Children's ramped up its recruiting of private practice doctors to be hospital employees.

After consulting physician salary surveys, she designed a plan setting the base salaries between the 25th and 75th percentile of national norms. Experience was to determine where the physicians placed within that range, approved by the board overseeing the All Children's practice.

But quickly, All Children's began to offer salary packages exceeding Schubert's fair market range, she says in the lawsuit. Within three years, the hospital had hired at least 75 physicians — and nearly one-third of all doctors at the hospital were drawing base salaries higher than the 75th percentile for their field.

"What she saw again and again was the hospital ignoring these regulations," said Casper, with the James, Hoyer law firm. "They were paying whatever it took to get these doctors onboard.

"She felt strongly that it was important to come forward and risk the negative consequences to bring this to light," he added.

She may not have been the only concerned party. The lawsuit says that when Johns Hopkins Medicine merged with All Children's in 2011, it brought in an outside consulting group to review the compensation contracts.

Casper wasn't sure what resulted from the study. Schubert left All Children's in 2011. She initially went on medical leave and then decided not to return, he said. She is now employed in a similar role at a medical facility in Sarasota that he declined to name.

As a whistle-blower, Schubert could receive as much as 30 percent of any money recovered by the lawsuit.

Times researcher Natalie Watson contributed to this report. Letitia Stein can be reached at [email protected] or (727) 893-8330.

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